Will a new adviser exam impact professionalism?

By Hope William-Smith

Go to the profile of Money Marketing
Sep 25, 2018
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A new Chartered Insurance Institute exam that lets the FCA assess adviser competence raises an important question: should passing tests at the beginning of your career qualify you for life?

Many in the advice profession would argue the examination process to become chartered or certified is lengthy enough. Despite the changing nature of the job, however, the FCA says many advisers have never had their competence re-tested.

Last week, the FCA and the CII announced a new test to reassess whether or not advisers with the Level 4 Diploma in Financial Planning still have sufficient knowledge.

While advisers largely agree the exam is a positive move, questions have been raised as to its necessity.

Indeed, many advisers commenting on Money Marketing’s website questioned if the exam was simply a way for the CII to gather more revenue from its members.

Suitability scrutinised 

The introduction of further exams should not come as a surprise. Money Marketing revealed in April the regulator had written to advisers asking for details of their training and competence and their recruitment records.

The new exam, covering Level 4 Diploma knowledge, will not be compulsory and will cost £110 for CII members and £150 for non-members.

The CII says the exam hones in on suitability standards and will cover basic knowledge questions across its RO1 to RO5 units, including financial planning principles, investment risk, taxation, and pensions and retirement planning.

The test is “prioritised by the potential for impact on the suitability of advice” and contains 100 multiple choice questions.

The CII says testing the skills of advisers is part of “firms’ obligations”, but it is stepping in with the offering to support the FCA’s push to raise standards for advice. While advisers who are members of larger network organisations, such as Tenet, are required to sit yearly tests, the obligation to reassess is at the discretion of individual firms.

A consultant speaking to Money Marketing, who did not want to be named, says: “The standard of financial capability among advisers in the UK is low. “Really understanding assets and asset classes and especially financial mathematics are things advisers don’t properly learn.”

The FCA has remained tight-lipped on exactly what constitutes good practice but says the “more technical aspects of financial advice” need attention and will be targeted in the exam.

CII development director Steve Jenkins says it does not have a benchmark it expects advisers who sit the test to meet.

He says the FCA expects the exam to work purely as a diagnostic tool for firms to carry out their own competency assessments.

Jenkins says: “The feedback we will provide on the outcome, pass or fail, will vary comprehensively to allow the individual to identify areas where additional learning may be required that they can then put into their development plan.”

Despite this, the FCA says it may use results from the re-evaluation at its discretion as a supervisory tool when it feels a firm should re-test specific advisers.

Page Russell director Tim Page says advisers should feel encouraged the FCA is involving itself and backing the exam.

He says: “It is very sensible the CII has gone to the FCA on how to formulate the exam. This kind of annual assessment is a positive thing and it will help advisers really identify those weaker parts of their knowledge.”

Increasing workloads 

While advisers have to complete at least 35 hours of continuing professional development a year, designed to keep knowledge up to date, changing policy and regulation also means advisers are lumbered with an increasing educational workload.

While they have not been tested, changing practices to fit the requirements of Mifid II and GDPR this year, along with the prospect of further regulatory change post-Brexit, has kept advisers busy working under multiple systems and has driven up the cost of compliance.

In the case of the Insurance Distribution Directive, advisers have 15 hours of specific CPD to complete annually to sell protection.

Jenkins says the re-evaluation exam will function separately as an “attractive option for advisers” helping to identify broad strengths and weaknesses.

While firms will have to shell out for advisers to sit the exam, Personal Finance Society and CII members will not need new study materials for the course.

Jenkins says: “They already get access to all the R0 study text manuals online so there is no need to purchase any learning materials, and everything they need to refresh themselves of what was covered within the Level 4 Diploma is available to them online.”

As the exam serves as a re-evaluation for a qualification already held, Jenkins also confirms it is not regarded as a standalone achievement or extension qualification.

Page says the idea for the re-evaluation follows on from the success of other educational offerings that have hit the market.

Experts agree the CII may be looking to capitalise on an easy-to-win commercial opportunity.

Page says: “The re-evaluation is a useful tool and it has been put out as an FCA-inspired offering. There does need to be more clarity about whether or not this means it is FCA-endorsed though or whether it’s something the FCA says is best practice.

“The CII has the advantage of its brand and it’s also useful because it will raise awareness.”

Jenkins says the CII has no expectation as to the results of the re-evaluation or the patterns that may become apparent.

He says: “The re-evaluation does exactly that, it just re-evaluates adviser knowledge.”

Essential Wealth planner Sonia Wheeler says the exam in its current non-compulsory state will be a welcome addition to education tools available.

She says: “This is a drive to raise the standards and competence of financial advisers and anything that contributes to that should be welcome.”

Advisers can sit the re-evaluation from October.


Adviser views

Sarah Hogan Director, KBA Financial Services 
As much as I hate to admit it, the new exam is a good thing. We already have to do 35 hours of CPD and this will form part of that but the CPD isn’t always necessarily structured around the areas of learning that are our weakest areas. Advisers in the main resist more exams but having experienced first-hand what a benefit doing my chartered and fellowship status were, anything that can enhance our knowledge, competence and technical ability can only be a good thing both for us and the consumer.

Susan Hill Director, Susan Hill Financial Planning 
I’m not sure about the motivation to set another test. I belong to a network, Tenet, so I have annual subject validation tests on every product I am licensed for, so I don’t need anything else to confirm and prove my competency. Maybe if you are directly authorised and don’t have access to these types of annual tests then subscribing to a CII test might be the answer, but as an appointed representative this is not necessary.


Expert view Keith Richards

Adviser education is a worldwide issue

The profession is being recognised by policymakers and the public for the key role advice plays in society, especially since the introduction of pension freedoms when regulated financial advice was mandated by legislation for safeguarded benefits over £30,000.

Maintaining technical competence is an accepted expectation and most financial advisers do this because of the business benefits.

Professional advisers have the power to make a significant difference to people’s lives. When failure or concerns unfold, however, it can often be a lack of competence that is highlighted.

The Australian regulator has recently conducted a Royal Commission into the misconduct in the banking, superannuation and financial services industries that will result in major reforms, including the introduction of “degree”-level qualifications and CPD for anyone giving financial advice.

While membership of a professional body has always required the maintenance of CPD, the regulator first recognised its importance within the RDR reforms when 35 hours became a mandatory requirement, together with the introduction of an annual statement of professional standing.

The ease of updating and testing knowledge online, avoiding the need for travel, will be appealing while principals of firms may also like the consistency for their registered individuals against an FCA-endorsed methodology, others may simply incorporate alongside other learning platforms.

Keith Richards is the chief executive of the Personal Finance Society

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